All Aviation Articles By Greg Reigel

Before You File A Part 16 Complaint Against An AIP Airport Sponsor, Make Sure You Try To Settle.

Airport owners or operators (“Airport Sponsors”) who receive federal grant funds under the federal Airport Improvement Program (“AIP”) must agree to certain obligations and conditions.  These obligations and conditions are commonly referred to as “Grant Assurances.” Sometimes an airport tenant may end up in a dispute with an Airport Sponsor if the tenant thinks the Airport Sponsor is not complying with certain Grant Assurances and harming the tenant.

Some of the most commonly disputed Grant Assurances include Grant Assurance 19 (Operation and Maintenance), Grant Assurance 22 (Economic Non-Discrimination), Grant Assurance 23 (Exclusive Rights), Grant Assurance 24 (Fee and Rental Structure), Grant Assurance 25 (Unlawful Revenue Diversion), and Grant Assurance 29 (Airport Layout Plan).

If a dispute arises, an airport tenant has options for pursuing a complaint against the Airport Sponsor.  However, the tenant should use reasonable efforts to try and resolve the dispute with the Airport Sponsor.  Not only is this a good business practice, but it is also a requirement if the dispute can not be resolved and a formal complaint to the FAA is needed.

Making A Complaint

An airport tenant who believes an Airport Sponsor has violated one or more of the Grant Assurances (the “Complainant”) may make a complaint to the FAA. The FAA will then investigate and, if the FAA finds non-compliance, the FAA may take enforcement action.

Informal Complaint.   Under 14 C.F.R. Part 13, a Complainant may make an informal complaint to the appropriate FAA personnel in any regional or district office, either verbally or in writing. The FAA will then review the complaint, investigate as needed, and determine whether (1) FAA action is warranted, or (2) if it appears that the airport sponsor is violating any of its federal obligations.

Formal Complaint.     If the matter is not resolved to the Complainant’s satisfaction, the Complainant may file a formal complaint with the FAA under 14 C.F.R. Part 16. And as the reference implies, this type of complaint involves a more involved and lengthy procedural process.  It also takes significantly more time before the FAA decides whether a violation has occurred.

Informal Settlement Efforts

Before a Complainant may file a formal complaint, 14 C.F.R. § 16.21 requires the Complainant to initiate and engage in good faith efforts to resolve the disputed matter informally with those individuals or entities the Complainant believes are responsible for the noncompliance. These efforts may include common alternative dispute resolution methods such as mediation, arbitration, or the use of another form of third-party assistance.

Additionally, the FAA Airports District Office, FAA Airports Field Office, FAA Regional Airports Division (responsible for administering financial assistance to the airport sponsor), or the FAA Office of Civil Rights are available, upon request, to try to help the parties resolve their dispute informally. Efforts to resolve the dispute informally are mandatory.

When the Complainant files a formal complaint, 14 C.F.R. § 16.27 requires the Complainant to certify that: “(1) [t]he complainant has made substantial and reasonable good faith efforts to resolve the disputed matter informally prior to filing the complaint; and (2) [t]here is no reasonable prospect for practical and timely resolution of the dispute.”

Although neither the FAA nor the regulations require a specific form or process for informal resolution, the Complainant’s certification must include a description of the parties’ efforts, which must be relatively recent prior to the filing of the complaint.

If the Complainant fails to make the certification, does not sufficiently describe the settlement efforts, or if the parties did not engage in informal settlement efforts, the FAA will dismiss the Complainant’s complaint.  Although the dismissal will be without prejudice, the Complainant will then be required to refile the Complainant’s complaint with the required certification.

Conclusion

If you are an airport tenant in a dispute with an AIP airport sponsor, you have options available to you for resolving the dispute.  As is often the case in disputes, the parties’ mutual settlement of the dispute is preferable and encouraged.

So, it usually a good idea to engage in settlement negotiations early.  And if the matter is not settled, you should be able to document the settlement efforts in which the parties engaged.  That way if a formal Part 16 complaint is required, you will have what you need to certify your informal settlement efforts and avoid dismissal of your complaint.

Pilots Flying Leased Aircraft Beware! Due Diligence Is Required To Protect Your Certificates.

The FAA is continuing its special emphasis on investigating and pursuing enforcement action against illegal charter operations. Many of these illegal operations involve leasing arrangements that are not compliant with the regulations, and that are also sometimes referred to as “sham leasing” or “disguised charter.”

When the FAA discovers such operations, it does not hesitate to take legal enforcement action against any pilots who operated aircraft on these illegal charter flights.  The FAA’s action typically involves an emergency order of revocation immediately revoking all of the pilot’s airman certificates.

While the FAA may then assess a civil penalty against other parties involved in the illegal operations (i.e. the aircraft owner or the aircraft operator), make no mistake – the pilots are the FAA’s first targets. And that is potentially a significant risk.

But before a pilot decides that he or she will simply refuse to operate an aircraft under a lease arrangement, it is important to understand that it is possible to structure leasing arrangements that are fully compliant with the regulations. Legal aircraft leasing structures are put in place every day.  Do not let anyone, including the FAA, tell you different.

How Does A Pilot Know Whether A Leasing Structure Is Legal?

First, the pilot needs to learn about and understand both legal and illegal leasing structures.  Next, with that education and understanding the pilot needs to perform some due diligence to confirm the legality of the leasing structure for the aircraft he or she will be flying.

What Type of Due Diligence Should A Pilot Conduct?

A pilot needs to do enough to confirm that the aircraft leasing structure and operations are compliant with the regulations.  Due diligence tasks a pilot should pursue include the following:

  1. Get a copy of Advisory Circular 91-37B Truth in Leasing and review. Although truth in leasing may not apply to the leased aircraft that will be operated, this AC provides a good general understanding of leasing arrangements and operational control requirements;
  2. Obtain a copy of the applicable lease agreement for the aircraft to be flown and review. Confirm that the lessee is the party exercising operational control;
  3. If Truth-in-Leasing applies under FAR § 91.23, confirm that the lease was filed with the FAA Technical Branch and notice was given to the applicable FAA Flight Standards Office at least 48 hours before the first flight under the lease;
  4. If the FAA has issued any Letters of Authorization (“LOA”) for the aircraft, review to confirm that the LOA is issued to the party who will actually be operating the aircraft. This should be the lessee;
  5. Enter into a separate pilot services agreement confirming the pilot’s agency on behalf of the aircraft lessee/operator;
  6. Although not a regulatory requirement, it also makes sense to review the insurance policy and endorsements issued for the aircraft to confirm that the policy actually covers the operations to be conducted by the lessee; and
  7. Make sure the aircraft leasing and operating arrangements passes a “gut check.” If the documentation is correct, are the parties actually operating consistent with the documents?  Or are the operations really being conducted as sham leasing or illegal charter?  Is a true leasing arrangement in place between aircraft owner and lessee, or is someone in the middle with whom the lessee coordinates all aircraft operations?

If the due diligence reveals a legitimate leasing structure, then a pilot can fly for the lessee operator with the knowledge that the pilot is not putting his or her airman certificates at risk.  Additionally, if the FAA ever asks about the operations (i.e. in connection with a ramp check, or perhaps after an anonymous tip by an unhappy competitor) the pilot will be able show the FAA inspector the due diligence he or she performed and explain how the operations are structured and conducted in compliance with the regulations.

However, if the due diligence does not check out, then the pilot should be wary about flying under the existing structure. Although it may be possible to restructure the leasing arrangement to bring it into compliance, until that happens any flights by the pilot could put his or her certificates at risk.

And if the aircraft owner or lessee do not permit the pilot to perform the due diligence, then the pilot should be especially cautious.  Since the pilot’s certificates will be the FAA’s first target if the operations are conducted illegally, the pilot should demand that he or she be permitted to confirm that the leasing structure is compliant.  Without that due diligence, the pilot may want to fly for someone else.

Conclusion

The FAA will continue its emphasis on and oversight of aircraft leasing operations.  It will also pursue legal enforcement action when it discovers sham leasing or illegal charter operations. Although pilots may still operate aircraft that are part of legitimate aircraft leasing structures, pilots should do their due diligence before they operate aircraft to ensure that it is not part of a non-compliant leasing structure.

If a particular lease arrangement is questionable, or if it is non-compliant, pilots should get help from a knowledgeable aviation attorney to review the arrangement and to help correct the leasing structure and operations, so they are compliant with the regulations.

FAA’s Intentional Falsification Settlement Policy: Not Much Of An Offer.

As you might imagine, the FAA has a dim view of intentional falsification cases.  These situations arise when the FAA believes that a certificate holder (whether airman, mechanic, air carrier, repair station etc.) has intentionally falsified a required record.  They range from airmen who have failed to disclose information on their applications for medical certificate to mechanics who have either omitted information or included incorrect information in aircraft maintenance records.

According to the FAA’s Compliance and Enforcement Program, a certificate holder who intentionally falsifies a record lacks the qualifications to hold any certificate.  As a result, FAA’s sanction in these cases is revocation of all certificates, usually by emergency order.  And after revocation, the certificate holder is generally prohibited from re-applying for new certificates for one year following the effective date of the order of revocation.

However, before the FAA issues a revocation order, it conducts an investigation in which it gathers evidence, sends out a letter of investigation, reviews any response, and analyzes all of the evidence to support its case.  This process can take a period of time.  But the certificate holder retains all certificates up until the revocation order is issued.

The New Policy

In the case where an airman has allegedly falsified his or her application for medical certificate in violation of 14 CFR 67.403(a)(1)-(4), the FAA recently announced a new “prompt settlement policy.”  According to the FAA, the new policy will afford an airman “the opportunity to apply for any airman and ground instructor certificate sooner than had the case proceeded in the absence of the policy.”

Under the new policy, the airman would still have to wait one year, but that would happen “sooner than under the current process because much of the investigation and evaluation processes would be abbreviated or eliminated.”  The policy provides the airman with an opportunity to resolve the alleged violation with a settlement agreement in which the airman (1) accepts an order revoking all of the airman’s certificates; (2) immediately surrenders all of his or her certificate; and (3) waives all of his or her appeal rights.

The FAA believes this policy will provide predictability for airmen as to when the revocation order is issued, and accordingly, when the airman would again be able apply for a new certificate.  It is also supposed to “promote better resource allocation.”

Who Is Eligible For This Policy?

The policy would be available to an airman who the FAA believes has violated 14 CFR 67.403(a)(1)-(4).  However, the policy will not be available to an airman if (1) the FAA believes the airman may lack qualification to hold his or her certificate(s) (other than because the airman allegedly violated 14 CFR 67.403(a)(1) through (4)); or (2) he or she has a prior violation of 14 CFR 67.403(a)(1) through (4).

How Does It Work?

When the FAA sends a letter of investigation (“LOI”) to an airman for alleged intentional falsification, the LOI will advise the airman that he or she may request consideration for a prompt settlement of the legal enforcement action.  If the FAA determines the airman is eligible, an FAA attorney will send the airman a settlement agreement with the following terms:

  1. The settlement agreement must be executed by the parties within ten days after the FAA sends the agreement to the airman;

  2. The FAA will issue an emergency order revoking all airman, ground instructor, and unexpired medical certificates the airman holds immediately upon receiving the fully executed settlement  agreement;

  3. The order of revocation will (a) require the immediate surrender of all airman, ground instructor, and unexpired medical certificates the individual holds to enforcement counsel; (b) notify the airman that the failure to immediately surrender these certificates could subject the airman to further legal enforcement action, including a civil penalty; and (c) inform the airman that the FAA will not accept an application for any new airman or ground instructor certificate for a period of one year from the date of the issuance of the order of revocation;

  4. The airman will waive all appeal rights from the order of revocation;

  5. The airman acknowledges that the agreement only concerns the legal enforcement action brought by the FAA and does not affect any actions that might be brought by State or other Federal agencies (whether civil or criminal), and that the agreement does not prevent the FAA from providing information about this matter to State or other Federal agencies;

  6. The parties will agree to bear their own costs and attorney fees, if any, in connection with the matter;

  7. The airman will agree to not initiate any litigation before seeking any costs, damages, or attorney fees, including applications under the Equal Access to Justice Act, incurred as a result of the legal enforcement action; and

  8. The airman will agree to waive any and all causes of action against the FAA and its current and/or former officials and employees relating to the legal enforcement action.

Is The Policy A Good Deal For An Airman?

From my perspective, this policy provides little real benefit to an airman, other than an airman who simply wants to roll over on his or her sword and start the clock ticking on his or her punishment.  Here are some of the problems I have with the policy:

  • An airman gives up all of his or her rights to have the FAA prove its case. The FAA has the burden of proof in these cases.  If the case involves factual issues as to whether the airman intentionally falsified rather than simply made a false statement, forcing the FAA to prove its case could be the difference between revocation of all certificates for intentional falsification versus revocation of just the airman’s medical certificate for making a false statement.

  • The policy does not protect the airman from criminal prosecution. An airman who the FAA believes committed intentional falsification could still be referred out to local or federal authorities for prosecution.  And the order of revocation and the facts upon which it was based would make it very easy for the prosecution to prove its case.  And since the FAA has, in fact, referred these cases out for prosecution, this is not a risk to be taken lightly.

  • The airman gives up his or her right to negotiate a reduction in the one-year prohibition on reapplication. If an airman appeals an order of revocation alleging intentional falsification, it is not uncommon for the FAA to agree to a 10 month, or in unusual circumstances a 9 month, prohibition in order avoid having to litigate its case against the airman before an NTSB administrative law judge.

  • The airman must surrender his or her certificates immediately. In the absence of surrender, the airman could have retained his or her certificates while the FAA completes its investigation and until it issues the revocation order.  This could be several months when the airman could continue to exercise the privileges of his or her certificates.

Conclusion

If you find yourself facing an allegation of intentional falsification, you know you made a mistake, and you just want to put the matter behind you, then the new policy may be worth considering.  However, you should also consider what you will give up.  In most situations it will likely make more sense to work through the enforcement process to obtain a more favorable resolution.

Understanding The “In Furtherance Of A Business” Limitation On Sport Pilot Privileges

An airman holding a sport pilot certificate recently asked me if the airman could fly to a location where the airman anticipated having a business meeting.  However, the airman indicated that he wasn’t necessarily flying to the location because he had to, but he wanted to in order to build time.
Unfortunately, based upon those facts it is likely the FAA would interpret the flight as being in furtherance of the airman’s business.  As a result, the airman would not legally be able to conduct the flight holding only a sport pilot certificate.  Here’s why.
Under 14 C.F.R. §61.315(c)(3) an airman holding a sport pilot certificate may not act as pilot-in-command of a light-sport aircraft “in furtherance of a business.”  The regulation does not explain what it means to fly “in furtherance of a business.”  However, the FAA Office of Chief Counsel has issued several letters of interpretation that provide some clarification.
In the 2011 Gilbert Legal Interpretation, the FAA stated that flight incidental to the airman’s employment or the business the airman intends to conduct, even if the flight is not required by the airman’s business, would be considered “in furtherance of a business.”  As a result, a sport pilot would be prohibited from conducting this type of flight.
The FAA explained further in the 2012 Allen-Terrafugia Legal Interpretation that “[a] flight would therefore be considered to be in furtherance of a business if it were conducted for a business purpose, even if the flight is only incidental to that business purpose.”  The FAA also noted that the sport pilot limitation is more restrictive than the “incidental to business” exception to private pilot limitations under 14 C.F.R. §61.113(b).
So, if you are an airman exercising the privileges of a sport pilot certificate, you are only authorized to conduct sport and recreational flights.  A flight in connection with a business purpose is prohibited under the regulations.

Disclosing Medical History On An FAA Application For Medical Certificate Is Not Limited To “Diagnoses”

If you have applied for an FAA medical certificate you know an applicant must complete FAA Form 8500-8GG via MedXPress and answer the questions on the form.  The FAA uses the information disclosed on the application to determine whether an airman is qualified to hold a medical certificate issued under 14 C.F.R. Part 67.
Question 18 asks for information regarding various medical conditions and circumstances that could have an impact on an airman’s medical qualification.  The preamble to Question 18 asks the applicant in all caps whether he or she has “EVER IN YOUR LIFE BEEN DIAGNOSED WITH, HAD, OR DO YOU PRESENTLY HAVE ANY OF THE FOLLOWING?”  The airman is required to answer “yes” or “no” and, if “yes”, he or she must provide an explanation to the FAA.
Unfortunately, some airmen get hung up on the word “diagnosed” and either ignore or fail to consider the broader wording in the rest of the question. An example of this situation occurred in the case of Administrator v. Smith.
In Smith, the airman failed to disclose certain medications he was prescribed for fatigue and depression.  And in response to Question 18(m) (asking about depression), the airman checked “no.”  After the aviation medical examiner (“AME”) issued a medical certificate to the airman, the FAA learned about the medications.  It also discovered that one of the conditions for which the medications were prescribed was depression.  Not suprisingly, the FAA was not pleased.
Consistent with Order 2150.3C, FAA Compliance and Enforcement Program, the FAA revoked all of the airman’s certificates for violation of 14 C.F.R. § 67.403(a)(1) (intentional falsification).  After a hearing, the National Transportation Safety Board Administrative Law Judge affirmed the FAA’s order of revocation.
On appeal to the full Board, the airman argued, among other things, that he did not know he had been diagnosed with a mental disorder because his doctors didn’t share their formal diagnosis with him.  However, the Board rejected this argument.
The Board held the airman’s argument improperly attempted to narrow the scope of the preamble to Question 18 and, specifically, Question 18(m) (asking about “mental disorders of any sort; depression, anxiety, etc.”).  The Board stated

[i]t is clear from the text of the form and both versions of the accompanying instructions, that item 18(m) is not limited to a formal diagnosis.  Rather, any medical “condition” is to be reported.  The existence of an underlying condition is not dependent on [the airman] being told the formal diagnosis or condition.

It went on to conclude that even if the airman was not told of the formal diagnosis, he was still aware of an underlying condition for which he sought treatment.  As a result, the airman’s checking the box “no” in response to Question 18(m) was a false statement, and a violation of the regulations.
Unfortunately, this situation occurs more often then it should.  And the FAA’s response to falsification is predictable and unforgiving: revocation of all certificates.
When you are applying for a medical certificate, it is important that you read the questions carefully.  If you are concerned about whether something should be disclosed, do your research first.  Talk to your AME before you go in for your examination.  Or talk to an experienced aviation attorney who can help you understand the question and determine whether your circumstances require you to check the “yes” box.

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